We mentioned it as an item to watch back in our April blog post The 6 Most Important Accounting Regulations for Small Businesses, and as you may now be aware, on May 18th the Department of Labor released its final rule raising the salary threshold for overtime exemption under the Fair Labor Standards Act (FSLA).
The final rule doubles the minimum salary needed to qualify for overtime exemption from $23,660 a year ($455 a week) to $47,467 a year ($913 a week). The new regulations take effect December 1, 2016.
What does this mean for small businesses?
Overtime can be costly, and small businesses in particular will be affected by these changes. Small business owners should have a plan in place to address those employees at or below the $47,476 threshold that will become eligible for overtime pay come December 1.
Employers essentially have three main options to consider to control overtime costs for those employees:
- Reclassify employees and restrict overtime hours.
- Reclassify employees without restricting overtime.
- Raise salaries to the new exemption threshold.
Business owners should start tracking hours now for salaried employees who are at or below the $47,476 threshold. Having an effective time-tracking system in place will be important in your efforts to comply with the new regulations as well as help make an informed decision on how and if these employees should be reclassified. Maintaining an accurate calculation of hours worked per week for each employee, along with a clear audit trail for those hours, will help avoid becoming a target of an employee lawsuit or DOL audit.
TSheets, one of many time-tracking solutions out there, does a good job here on their blog of explaining the new salary threshold’s effect on employers and the three main options listed above for employers to consider. While TSheets is not the only time-tracking solution available (it is one we highly recommend however), this article is definitely worth a read.
Need help or more information? Want to set up a stand-alone time-tracking system or one that integrates with QuickBooks? Call Sepulvado Consulting Group at (318) 465-3674 or submit an online request below to have a Sepulvado Consulting representative contact you.